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Sales layoffs may be ahead as Hospira loses fight against Precedex generics

September 9, 2014
Life sciences

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Hospira’s reprieve from generic Precedex competition was short-lived. The U.S. district court that temporarily stopped Precedex generics has now decided to let the copycats roll. And that could mean Hospira will soon be sharpening its job-cutting ax.
Late last month, Hospira sued Mylan, fellow generics maker Par Sterile Products and the FDA, challenging the agency’s choice to allow Precedex copies to go on sale. The agency had issued an unusual “carve-out” decision that would let the generics companies sell Precedex copies for one of the drug’s two FDA-sanctioned indications.
It had been an unexpected blow to one of Hospira’s top products, and the company quickly warned that early generic competition would force it to lay off hundreds of employees.
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U.S. District Judge George Jarrod Hazel issued a restraining order that stopped Mylan and Par copies in their tracks. But now that the court has had time to consider the case, it decided to let the FDA’s generics decision stand.
Mylan announced the news today, saying that it would immediately go back to shipping its Precedex copy. Meanwhile, in a Securities and Exchange Commission filing, Hospira said it had appealed the decision and would ask for another restraining order pending appeal.
“[A]bsent relief from the Court of Appeals, sales of generic Precedex likely will continue and the FDA may grant additional approvals, both of which will have an adverse impact on the company’s net sales of Precedex and related results of operations,” the company said in its SEC filing.
Sterne Agee analyst Shibani Malhotra says 5 generics makers are targeting Precedex, which brought in 11% of Hospira’s sales last year. Malhotra estimates that the drug delivered $320 million to Hospira’s top line last year, and $221 million to the bottom line.
And that’s why Hospira raised a red flag about layoffs. The company said in its original lawsuit that, if generic Precedex hit the market, it would have to cut almost all of its sales team dedicated to the product. The company didn’t mention job cuts in today’s SEC filing, but did confirm its earnings guidance for the year, at $2.30 to $2.50 per share.
By Tracy Staton

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